Which Pricing Model is Best for Your Mobile App

A question that commonly arises after the development of an app:

"Should we charge for this app, or allow it to be downloaded for free?".

While all developers want the best mobile experience for their users, developers themselves have to find a way to keep the lights on. The success of how you price your mobile app depends greatly on the category under which your app falls, the perceived value of your app, and how users expect to interact with your app. The psychology of cost and how your audience feels towards your brand can have a profound impact on the success of your mobile app. Let's review the pricing model options and the pros and cons of each.

Paid App Pricing Model

Benefits

The obvious benefit of charging for your mobile app is incoming revenue to cover developer fees and overhead. Studies show that apps that charge for download have a higher 'perceived value', and create a sense of status to use. Additionally, people who pay for your app are more likely to want to "get their money's worth" and engage with your app more frequently than if it were just a free download. Users are also more likely to remain loyal to your app if they've paid for, instead of finding another alternative elsewhere.

Companies and brands with a large, pre-existing customer base generally see success with paid app models.

Drawbacks

Setting your app as a paid app can have more drawbacks than the $.99 (less app store fees, which can be around 30%) is worth. For the developer, even the $0.99 paid apps tend to have lower download rates. Many people refuse to download an app simply because it isn't free, and will scour the app store to find another suitable substitution for your app. Others are willing to pay for a quality app but, due to the aforementioned perceived value of paid apps, have higher expectations about the app's performance, the frequency of updates, and the customer service provided after download. Fewer downloads and higher customer expectations can mean fewer, harsher (read: fewer stars) reviews, and this can greatly impact your visibility in the search engine that is the app store(s).

Free App Pricing Model

There is plenty of debate about the expected 'freeness' of mobile apps - many believe it is consumer preferences that have cause the shift, while many others believe it is the fault of app developers themselves trying to score on all the free competition. Regardless of the reasons why free apps are becoming the expected norm, the fact remains that users would rather tolerate ads and even miss out on premium features than pay for an app.

Benefits

Free apps boast more reviews, higher ratings, and more downloads. Since reviews and ratings play a critical factor in your app's visibility, setting your app to free can have profound effects on your app's store ranking. Free apps make it easier for developers to reach new audiences and use their apps as a tool for business growth. Free apps play up the reciprocity effect, which finds that we humans have a tendency to want to return favors that are done for us or give something back in return for something given. By giving the public your app for free, they are more likely to return the favor and write a favorable review and use your app.

Drawbacks

For developers, bringing in little to no revenue per download isn't an ideal situation, especially if they have their own bills to pay (and trust us, we always do!). For users, more often than not, the only thing that draws them to a free app is the price. This eliminates that perceived value we keep mentioning, and the user may not feel the same loyalty factor that they feel when they pay for something. They may be more likely to find a substitute for your app quickly since they have no commitment to your brand over any of the other free apps in the app stores.

Freemium Pricing Model:

the 'Sweet Spot' for Developers

Studies have proven that people are more willing to tolerate advertisements within apps than they are willing to pay even a dollar. A 'Freemium' pricing model allows users to download the basic capabilities of your app while blocking certain features until the user pays for them. This eliminates the "risk" a user feels when purchasing an app, while still allowing you to upsell your premium features. This low-commitment relationship also means that developers can "get their foot in the phone" so to speak; it is easier to encourage a user to engage with an app that is already installed on their device than it is to encourage a user to download a totally new app. Freemium models enable users to download apps on a whim since there is no commitment and no barriers to entry. Additionally, freemium models help curb the expectations of users who didn't pay for the app, resulting in more reviews and higher ratings.

Have you seen success with Free, Paid, or Freemium pricing models? We'd love to hear your thoughts!